Why Your U.S. Debit Card May Not Work in Canada
The confusing thing about your U.S. debit card not working in Canada is all the times it does work. It’s not easy to know when you can rely on it, or when the cashier will give you the stink-eye instead. Even though you’re used to traveling the world using your debit card, you might want to get out cash for that three-hour trip northward. (Here, read Jay’s “Passport to Pleasure: Six Letters Spell Sensuality in Victoria” to get started.)
The SunBreak Cross-Border Debit Transaction Team have sleuthed out the reason why. The culprit is something called Interac, which is Canada’s venerable debit card transaction handler. Interac, founded in 1984, has terrific penetration among Canada’s banks, and its ATMs and point-of-sale check-outs are everywhere.
The problem is that Interac, used by the vast majority of merchants, does not interact with your U.S. financial institution. Now, in the U.S., there’s a proliferation of interbank networks for this very task, and they have worked out agreements to let other systems use their networks. That’s why your debit card likely has one or more logos on its reverse: STAR, NYCE, or Pulse, to name a few. But none of these, to our knowledge, have agreements with Interac.
This doesn’t mean you can’t use your debit card at all in Canada. For one thing, most ATMs belong to the global PLUS or Cirrus networks, so you can still get cash out using your PIN. For another, there’s Visa.
Since October 2010, with the launch of Canada’s first Visa debit card, Interac has had to share its corner on the debit card market. What usually happens these days is that a Canadian establishment can use Visa’s system to process your payment, with your signature in lieu of a PIN. So far, so good. But smaller shops may not take Visa, and if they’re using Interac, your debit payment will fail, with no reason given for the non-authorization.
The reason smaller merchants don’t take Visa in Canada is the same as here: Visa takes a percentage fee of the transaction. Interac, by contrast, is a non-profit organization (not for lack of trying) that operates on a cost-recovery basis. They charge a flat fee for each transaction that is supposed just to cover their costs. This may prevent Interac from partnering easily with U.S. interbank networks.